Stifel is upgrading Abercrombie & Fitch (NYSE: ANF) from Hold to Buy with a price target of $24

Analyst Richard Jaffe noted an improved merchandise assortment and restructured and "greatly" reduced cost structure.

Jaffe commented:

Our outlook regarding ANF shares has grown more favorable. Sales trends have accelerated as customers are responding favorably to the company’s recent floorsets despite reduced promotions. We believe ANF’s momentum is sustainable driven by: an improved merchandise assortment (fueled by improved talent and inventory management), expense reductions and easy comparisons.

Given our more favorable outlook, we are upgrading ANF to Buy from Hold. As visibility for significant operating margin improvement becomes more evident, we believe the stock will trade up to our new target price of $24 (18.5x our 2016 EPS of $1.30). An 18.5x multiple is at a slight premium to the 1-year average of the out year consensus multiple, which we view as appropriate given our improved outlook for the company.

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